Cyprus: Cyprus Case Law: Bank's Duty Of Confidentiality Reaffirmed

It is widely accepted that the bank secrecy has been under scrutiny during the past few years. According to Cyprus law, this matter is regulated by the Banking Law (66(I)/97) which contains an exclusive part with provisions concerning bank secrecy.

Bank confidentiality in Cyprus is guaranteed by section 29(1) of the Credit Institutions Law of 1997 (Law 66(I)/97). According to Section 29(1) it is prohibited for any member of the administrative body of the management body, chief executive, director, manager, officer, employee of a bank who has by any means access to the records of a bank, with regard to the account of any individual customer of that bank, while his employment in or professional relationship with the bank, as the case may be, to give, divulge, reveal or use for his own benefit any information whatsoever regarding the account of that customer.

Paragraph (2) of section 29 provides for various exemptions for lifting banking confidentiality, among which is the provision of information imposed for reasons of public interest as is the case where an order of the Court for disclosure of information has been issued (Norwich Pharmacal type orders).

Without such order, disclosure is not possible, unless of course it falls under another exemption of section 29(2) of Law 66(I)/97 and section 22(4) and (5) of the  law of Evidence, Cap. 9. Having as main purpose the protection of all information that could be originated by the accounts of a bank's customers, this section applies to any bank licensed in Cyprus or any branch of a bank of an EU member state established in Cyprus.

With a recent judgment of the Supreme Court of Cyprus in Civil Appeals Nos.182/2012 and 184/2012 the principles within the context of Norwich Pharmacal (disclosure) proceedings and issues of breach of bank confidentiality were strongly reaffirmed, our firm acting for one of the Appellants. Both appeals were filed against an interim decision of the District Court of Nicosia, by virtue of which a Mareva type injunction was issued freezing bank accounts. Both Appellants filed against the said order claiming it is wrong at first instance.

The Appeal was largely grounded on the following arguments:

  1. Wrongly and in breach of the constitutional rights of the Appellants the Court of first instance issued a freezing injunction based solely on the affidavit of an employee of a Bank submitted in the Court's file without a disclosure order been ever issued.
  1. Despite the fact that the Court of first instance acknowledged that an order for disclosure of the accounts and transactions of one of the Appelants was never issued and that, for an unknown reason the order drafted was irregularly used and delivered by the Respondents to the Bank the Court of first instance took into consideration information illegally submitted in breach of the Appellants' privacy rights.
  1. The Court of first instance wrongly commented that the bank institution complied with the order served upon it, not knowing that in fact this order was never issued.
  1. Based on the judgment at first instance, it transpires that the evidence derived from the affidavits and the exhibits accompanying the application was very general and insufficient to satisfy prima facie the two provisions of section 32 of the Courts Law and therefore the freezing orders should not have been issued, let alone become absolute.
  1. Despite the fact that the Court of first instance ascertained that the evidence was general, it failed to ascertain in particular that the evidence supporting the ex parte application consisted of:- (a) a fabricated anonymous letter drafted three years after the first Appellant ceased to work for the Plaintiffs.

Proceeding to the essence of the grounds of the appeal, the Supreme Court highlighted the Bank Confidentiality in Cyprus with particular emphasis on Section 29 of the Credit Institutions Law and the various exemptions. According to the Supreme Court it is obvious that confidentiality is a cornerstone of the bank-customer relationship. Having regard issues of confidence and credibility, the protection of bank-customer secrecy relation remains very important. Cyprus legal system provides such protection under the relevant legislation and only with the appropriate judicial formalities disclosure order can be secured.

In this case, the Judges considered that the evidence disclosed by the affidavit of the employee of the Bank should not have ever been taken into consideration as a relevant order of the Court was never actually issued. It became obvious that the Court of first instance, even though locating the mistake in the drafted order, subsequently it was not concerned not taking into consideration the affidavit for the purposes of examining the continuance in force of the temporary freezing order. The accidental inclusion, by the Registrar, of a disclosure provision in the drawn up gagging order in no way makes the former legal. Therefore, the finalization of the freezing order was based on evidence that was illegal and without the Appellants being given the opportunity to be heard on matter.

Furthermore as the Respondents during the procedure did not proceed with clean hands, the Appellants were not given the chance of a fair trial therefore there was no other choice than cancelling the freezing order in question. Judges of the Supreme Court went on to discuss the Respondents' lawyers' behaviour as follows:

"The second point we would like to comment upon is the duty of the lawyer for the Respondent as an officer of the Court. He ought to have seen in good time that, additionally to the gagging order, the drafted order incorrectly contained an order for disclosure, the issue of which, even though sought by the application, was not requested by him, and therefore he ought not to have proceeded with serving the order to the Bank but instead ought to have brought this fact to the attention of the Registrar or the Court. We cannot understand why the lawyer for the Respondents could not in this case fulfill his duty towards the Court.

In our opinion, the mistake should have been seen at a second stage, when the Bank presented a sworn statement of disclosure. The lawyer for the respondents, knowing that he did not request the issue of such an order from the Court, should have realized his mistake immediately and brought the fact to the attention of the Court. Instead, he continued to present the facts, even in an Affidavit  that a disclosure order had been issued."

Orders for disclosure may be issued as auxiliary orders in cases where the real wrongdoers are not known to the plaintiff or for policing purposes of the freezing order, so that the plaintiff knows which assets exactly the defendant holds in his possession at the given time in order to be able to check at a subsequent time whether there was compliance with the freezing order.

In England, the right to disclosure exists before the filing of the action (pre-trail orders). In Cyprus however, due to the provisions of section 32 of the Courts Law no regulations have been issued allowing the issue of auxiliary interlocutory orders for the purposes of bringing an action. However, on the basis of equity, the filing of an action against a person indirectly involved in a wrongdoing or who possesses information which may assist the plaintiff subsequently filing a second action against the persons who breach his rights is not excluded.

In this case, the identity of the persons against whom the Respondents wanted to act, was known to them. What they wanted was, after filing the action against the persons who had allegedly wronged them, was to "fish" for information though an auxiliary disclosure order. The appropriate was to simultaneously request a discovery order to assist and police the freezing order they were seeking. However, because it was requested directly against a Bank, the auxiliary disclosure order was possibly not needed, since the issue of an order for the freezing of assets against the Appellants and a simple notification of the order to the Bank would be enough to block the transfer of money from the accounts under dispute. Any possible assistance by the Bank to breach the freezing order would constitute a contempt of Court. In the words of the Supreme Court: "...The lawyers for the Respondents, in our opinion, followed an unorthodox procedure under the present circumstances. They pursued a gagging order without the prior issue of a disclosure or search order, in which case the gagging order would have some meaning. The court of first instance did not endeavour to point out this fact to the lawyers for the Respondents...." 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.